Payments – How Fintech Can Fuel Global Expansion

As your business succeeds, there will come a point when you have to expand your market. A research by Accenture predicts that B2C ecommerce will reach $3.4 trillion globally as more people around the globe prefer purchasing online. Forrester also expects more B2B purchases to shift online as well. Because of this, you may consider going cross-border in your region or even global to grow sales for your standout product or service.

However, before taking this big step, you need to make improvements to your ecommerce platform and even your business processes to ensure that everything works for your new markets. Aside from figuring out logistics, pricing, and localization, you should also be reviewing the payment methods that you offer. Payment methods are critical to getting cross-border ecommerce to work.

Preferred Payment Methods Vary

Much like there is no universal currency, there is no definitive payment method that is accepted by all consumers and merchants worldwide. Each region or country would have their own preferred payment method.

In the US, cards dominate payments. Despite the rise of payment service providers (PSPs) such as PayPal, digital wallets such as Apple Pay and Android Pay, and even brand loyalty cards, most of these services still require the use of credit or debit cards as funding sources. What these technologies essentially provide is a layer of convenience for users so they don’t have to manually input their credentials to pay for online purchases.

European countries are leading the world in going cashless. Take Sweden’s case for example. Due to cooperation between their banks and an evolving financial technology scene, the Swedish can use their bank accounts for most financial concerns such as receiving salaries, savings, loan applications, and payments. This focus on bank accounts is shared by other European countries.

“The use of online banking is on the rise throughout Europe, due to the increasing convenience and simplicity for consumers to access their bank accounts via the online channel. As a consumer the online bank account is your primary funding source, your true digital wallet,” said Johan Nord, Chief Commercial Offic of Trustly, a Swedish Payment Services Provider (PSP), commenting on Europeans’ money habits.

Lack of Payment Methods Leads to Lost Sales

In less developed countries such as some in Asia, cash remains king. Despite having high rates of technology adoption, countries such as the India continue to be cash dependent. Banking and card penetration remains low so even with online purchases, merchants are compelled to provide cash-on-delivery (COD) payment options.

Amazon, which generally accepts credit cards and even has its own gift card in the US, had to accommodate cash-on-delivery as means of fulfillment when it expanded to India. A staggering 83 percent of Amazon India transactions are COD which represents a significant part of market Amazon could have lost if COD wasn’t available. Other ecommerce players Flipkart and Snapdeal also had to do the same.

PSPs Enable Cross-border Payments

Clearly, failing to cater to the generally accepted payment method in a particular market can be detrimental to your cross-border efforts. However, even payment processing can be complicated depending on the market’s preferred payment method. This is where PSPs can help out.

Trustly rides on Europe’s debit-centric mindset to enable merchants to accept payments through customers’ bank accounts for online transactions. This financial mindset is prevalent in Europe, allowing Trustly to expand their presence to 29 other European countries.

Elsewhere, a huge part of the appeal of partnering with processors like PayPal is that they provide means of accepting credit card payments. Enabling your ecommerce site to directly accept card payments requires considerable effort to comply with Payment Card Industry (PCI) standards. Using payment processors, you can readily accept payment from major card companies. In some jurisdictions, PayPal can also draw from bank accounts as funding source.

PSPs also simplify administration. Without a provider, you may be looking at directly creating agreements with banks and other entities in order to handle payments from abroad. Since they handle all the integrations with banks and card companies, you only have to deal with them in order to be able to accept these payment options.

Security and Chargebacks Are Concerns

But aside from allowing a variety of funding sources, the providers can also offer security for you and your customers.

Security continues to be a growing concern in today’s ecommerce. Because of the amount of customer information contained in ecommerce sites, they become prime targets for data breach attacks. By using a PSP, you can add the layer of security for your service.

Chargebacks and fraud become even more pressing concerns in cross-border ecommerce, both of which are risks when you accept cards for payments. Fraudsters particularly prey on retail since they effectively get their score through the value of the item they buy using stolen credit card numbers. In cases of chargebacks, merchants risk losing not only the cost of the item but also shipping and other logistics costs as well.

Among the appeals of the use bank accounts and fund transfers is that, unlike credit cards, chargebacks aren’t a concern with fund transfer. It also uses two-factor authentication and uses the bank’s system to verify purchases to ensure that the payment attempts are legitimate.

PSP Choice is Crucial

Going cross-border requires much preparation. As money habits vary per region, making sure that your ecommerce platform accommodates a wide range of payment options is key to serving these different markets. It is important to partner with PSPs that not only allow you to accept payment methods preferred by your new prospects but also has features that simplify the process. By avoiding the worry of payments, you can focus on working on other things that matter such as localization and pricing strategies. If all things go well, expanding your market would only help your company grow.

The Author

Ralph Tkatchuk

Ralph Tkatchuk is a freelance data security consultant and expert with 10 years of field experience working with clients of various sizes and verticals. He is all about helping companies and individuals safeguard their data against malicious online abuse and fraud. His current specialty is in eCommerce data protection and prevention.